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Income Tax Act 2007

Tax credits paid in cash - Adjustment of net income for family scheme

MB 1: Adjustments for calculation of family scheme income

You could also call this:

“How to adjust your income when calculating family tax credits”

When calculating family scheme income for tax credits, you need to understand these rules:

  1. Your income from a job is treated as if you earned it evenly throughout the year.

  2. Your income from a main benefit is treated as if you received it evenly during the time you got the benefit.

  3. Other income is treated as if you earned it evenly throughout the year.

  4. Some overseas pensions, maintenance payments, and certain salary or wages that are usually tax-free are included in your family scheme income.

  5. You can deduct maintenance payments you made and certain child support payments.

  6. Income from some retirement savings schemes is not included, but income from other investment entities usually is included.

  7. Some depreciation losses on buildings are not included in your family scheme income.

  8. Money you put into a main income equalisation account increases your family scheme income, but money you take out does not.

  9. Child tax credit amounts are not included in your family scheme income.

These rules help determine your family scheme income, which is used to calculate your entitlement to tax credits under the family scheme.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518454.

Topics:
Money and consumer rights > Taxes
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MA 8: Some definitions for family scheme, or

“Definitions of key terms for family tax credit calculations”

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MB 2: Adjustment for period that is less or more than 1 year, or

“Adjusting your family income for periods shorter or longer than a year”

Part M Tax credits paid in cash
Adjustment of net income for family scheme

MB 1Adjustments for calculation of family scheme income

  1. The calculation of an entitlement and tax credit under the family scheme is based on a person's family scheme income. A person's family scheme income is an amount based on their net income, and is adjusted as provided by this subpart. The following paragraphs apply in relation to assessable income derived by the person in a relationship period in an income year:

  2. to the extent to which the income is derived from employment during all or part of the income year, it is treated as derived at a uniform daily rate during the period of the employment; and
    1. to the extent to which the income is derived as a main benefit, it is treated as derived at a uniform daily rate during the period in the income year for which the benefit is paid to the person; and
      1. despite section 38(1) of the Tax Administration Act 1994,—
        1. to the extent to which the income is derived otherwise than under paragraph (a) or (b), it is treated as derived at a uniform daily rate during the income year; and
          1. any expenditure incurred in deriving the income referred to in subparagraph (i) that is allowed as a deduction is treated as incurred at a uniform daily rate during the income year.

          2. For the purposes of subsection (1), an amount derived by the person in the income year is not treated as exempt income if it is—

          3. an amount referred to in section CW 28(2)(a) or CW 32 (which relate to overseas pensions and maintenance payments):
            1. an amount of salary or wages that is exempt from income tax under an Act, or under a regulation or Order in Council made under an Act, that is listed in schedule 38 (Acts exempting income from tax: income included in family scheme income).

              1. For the purposes of subsection (1), the person is allowed a deduction for—

              2. the amount of any payment, made by the person during the income year, of the kind referred to in section CW 32 (Maintenance payments); and
                1. the amount of any payment made by the person during the income year under section 27K of the Social Security Act 1964, as saved by section 256 of the Child Support Act 1991.

                  1. Repealed

                  2. For the purposes of subsection (1),—

                  3. an amount of income attributed by a portfolio investment entity to the person for an income year—
                    1. is not included in family scheme income of the person for the income year if the portfolio investment entity is a superannuation fund or retirement savings scheme:
                      1. is included in family scheme income of the person for the income year if subparagraph (i) does not apply:
                      2. a distribution from a listed PIE that is derived by the person in an income year is included in family scheme income of the person for the income year.

                        1. For the purposes of subsection (1), an amount of retirement scheme contribution that is not excluded income of the person and would be their excluded income in the absence of section CX 50B(2) (Contributions to retirement savings schemes) is not included in family scheme income.

                        2. For the purposes of subsection (1), in relation to a building from the disposal of which the person derives assessable income, an amount of depreciation loss allowed in the 2002–03 or earlier income year is not included in family scheme income. However, this subsection does not apply to an amount of depreciation loss of a business or investment activity that under section MB 3 is treated as having no net income for the purposes of calculating family scheme income.

                        3. For the purposes of subsection (1), the person’s family scheme income is increased by the amount of a main income equalisation deposit the person makes for the income year.

                        4. For the purposes of subsection (1), the person’s family scheme income does not include the amount of a main income equalisation refund the person receives for the income year.

                        5. Repealed

                        6. The amounts described in section MZ 2 (Calculation of child tax credit) are not included in the person’s family scheme income.

                        Compare
                        Notes
                        • Section MB 1(1) heading: replaced, on (applying for the 2014–15 and later income years), by section 108(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                        • Section MB 1(1): amended, on (applying for the 2014–15 and later income years), by section 108(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                        • Section MB 1(1)(b): amended, on , by section 141 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section MB 1(2): substituted, on , by section 111(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section MB 1(2)(a): amended, on , by section 75 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                        • Section MB 1(4) heading: repealed, on , pursuant to section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                        • Section MB 1(4): repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                        • Section MB 1(5) heading: substituted, on , by section 111(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section MB 1(5): substituted, on , by section 111(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section MB 1(5B) heading: inserted, on , by section 456(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                        • Section MB 1(5B): inserted, on , by section 456(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                        • Section MB 1(5C) heading: inserted (with effect on 1 April 2008), on , by section 84(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                        • Section MB 1(5C) heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section MB 1(5C): inserted (with effect on 1 April 2008), on , by section 84(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                        • Section MB 1(5C): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section MB 1(5C): amended (with effect on 1 April 2011), on , by section 135 of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                        • Section MB 1(5D) heading: replaced (with effect on 1 April 2011), on , by section 206(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section MB 1(5D): replaced (with effect on 1 April 2011), on , by section 206(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section MB 1(5E) heading: inserted (with effect on 1 April 2011), on , by section 206(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section MB 1(5E): inserted (with effect on 1 April 2011), on , by section 206(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section MB 1(6) heading: repealed, on , pursuant to section 111(4) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section MB 1(6): repealed, on , by section 111(4) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section MB 1 list of defined terms business: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                        • Section MB 1 list of defined terms depreciation loss: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                        • Section MB 1 list of defined terms income statement: repealed, on , by section 121 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section MB 1 list of defined terms income tax: inserted, on , by section 111(5) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section MB 1 list of defined terms income-tested benefit: repealed, on , by section 141 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section MB 1 list of defined terms LAQC: repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                        • Section MB 1 list of defined terms listed PIE: inserted, on , by section 111(5) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section MB 1 list of defined terms main benefit: inserted, on , by section 141 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                        • Section MB 1 list of defined terms main income equalisation account: inserted, on , by section 111(5) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section MB 1 list of defined terms main income equalisation deposit: inserted (with effect on 1 April 2011), on , by section 206(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section MB 1 list of defined terms main income equalisation refund: inserted (with effect on 1 April 2011), on , by section 206(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section MB 1 list of defined terms portfolio investment entity: inserted, on , by section 351(2)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                        • Section MB 1 list of defined terms portfolio investor allocated income: repealed, on , by section 351(2)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                        • Section MB 1 list of defined terms retirement savings scheme: inserted, on , by section 111(5) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section MB 1 list of defined terms retirement scheme contribution: inserted, on , by section 456(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                        • Section MB 1 list of defined terms salary or wages: inserted, on , by section 111(5) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section MB 1 list of defined terms superannuation fund: inserted, on , by section 111(5) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).